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Petitioner is a domestic corporation whose primary purpose is to establish, maintain,conduct and
operate a prepaid group practice health care delivery system or a health maintenanceorganization to
take care of the sick and disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization.

Individuals enrolled in its health care programs pay an annual membership fee and areentitled to
various preventive, diagnostic and curative medical services provided by its dulylicensed physicians,
specialists and other professional technical staff participating in the group practice health delivery
system at a hospital or clinic owned, operated or accredited by it.On January 27, 2000, respondent CIR
sent petitioner a formal demand letter and thecorresponding assessment notices demanding the
payment of deficiency taxes, includingsurcharges and interest, for the taxable years 1996 and 1997 in
the total amount of P224,702,641.18.The deficiency DST assessment was imposed on petitioner's health
care agreement with themembers of its health care program pursuant to Section 185 of the 1997 Tax
Code.Petitioner protested the assessment in a letter dated February 23, 2000 and filed a petitionfor
review in the CTA seeking the cancellation of the deficiency VAT and DST assessments.On April 5, 2002,
the CTA rendered a decision, partially granted petitioners petition.Respondent:Respondent appealed
the CTA decision to the CA

insofar as it cancelled the DSTassessment. He claimed that petitioner's health care agreement was a
contract of insurance subjectto DST under Section 185 of the 1997 Tax Code. The same was granted by
CA since petitioner'shealth care agreement was in the nature of a non-life insurance contract subject to
DST.Petitioner essentially argues that its health care agreement is not a contract of insurance buta
contract for the provision on a prepaid basis of medical services, including medical check-up,that are not
based on loss or damage. Petitioner also insists that it is not engaged in the insurance business. It is a
health maintenance organization regulated by the Department of Health, not aninsurance company
under the jurisdiction of the Insurance Commission. For these reasons, petitioner asserts that the health
care agreement is not subject to DST.

Whether or not a health care agreement is in the nature of an insurance contract andtherefore subject
to the documentary stamp tax (DST) imposed under Sec. 185 of R.A. 8424.
Yes.Under the law, a contract of insurance is an agreement whereby one undertakes for aconsideration
to indemnify another against loss, damage or liability arising from an unknown or contingent event
The event insured against must be designated in the contract and must either beunknown or
contingentPetitioner's health care agreement is primarily a contract of indemnity. And in the recentcase
Blue Cross Healthcare, Inc. v. Olivares

this Court ruled that a health care agreement is inthe nature of a non-life insurance policy.Under the
health care agreement, the rendition of hospital, medical and professionalservices to the member in
case of sickness, injury or emergency or his availment of so-called "out- patient services is the
contingent event which gives rise to liability on the part of the member. Incase of exposure of the
member to liability, he would be entitled to indemnification by petitioner.The insurable interest of every
member of petitioner's health care program in obtaining thehealth care agreement is his own
health.Contracts between companies like petitioner and the beneficiaries under their plans aretreated
as insurance contracts. This is because petitioner does not bear the costs alone butdistributes or spreads
them out among a large group of persons bearing a similar risk, that is,among all the other members of
the health care program and that is insurance.Further, DST is not a tax on the business transacted but an
excise on the privilege,opportunity, or facility offered at exchanges for the transaction of the business.
It is an excise onthe facilities used
in the transaction of the business,
separate and apart from the business itself